SPI recedes to new 27-month low

KARACHI:

Pakistan's weekly inflation slowed down to a new 27-month low at 16.69% as the pace of surge in food prices eased in the week ended August 21, 2024 compared to the same week of last year.

Still, the reading is elevated in double digits, suggesting there is a big room for further reduction in the rate of inflation.

The persistent downturn in weekly inflation numbers supports projection that the benchmark monthly inflation, measured through the Consumer Price Index (CPI), would drop into single digit in August 2024, down from the three-year low of 11.1% hit in the prior month.

According to the Pakistan Bureau of Statistics' (PBS) data, the weekly inflation gauge, calculated through the Sensitive Price Indicator (SPI), ticked down 0.10% on a week-on-week basis. It remained on a downward trajectory for the second successive week.

The nominal reduction in week-on-week inflation was led by tomatoes, which dived 21.96% to Rs121.11 per kg in the week under review compared to Rs155.19/kg in the prior week.

It was followed by wheat flour, which got cheaper by 2.77% to Rs1,800.06 per 20kg bag compared to Rs1,851.43/bag a week earlier.

Bananas cost 2.08% less at Rs141.53/dozen compared to Rs144.53/dozen in the previous week. Onions ticked down 1.70% to Rs136.61/kg compared to Rs138.97/kg.

Sugar (refined) dropped 1.43% to Rs143.79/kg in the week under review compared to Rs145.88/kg in the prior week.

Prices of other essential commodities decreased up to 1.25% including chicken, masoor pulse and bread.

However, prices of some other goods rose up to 6.10% which included eggs, gram pulse, potatoes, cooked daal, cooked beef, mustard oil, beef, shirting, milk fresh and liquefied petroleum gas.

The slowdown in short-term inflation and projection for a similar trend for the benchmark CPI reading supported market talk that the central bank would make a third consecutive reduction in its key policy rate in the upcoming monetary policy review scheduled for September 12.

The State Bank is likely to slash the policy rate by 1-1.5 percentage points. At present, the rate stands at 19.5% following a cumulative reduction of 2.5 percentage points in June and July this year.

SPI comprises 51 essential items whose price data is collected by the PBS from 50 markets across 17 cities of the country.

During the week ended August 21, 2024, out of the 51 items, prices of 21 (41.18%) items increased, rates of nine (17.64%) items decreased and prices of 21 (41.18%) items remained unchanged compared to the previous week.

The year-on-year increase of 16.69% in SPI reading was mainly led by Q1 gas charges, which surged 570%, followed by onions, up 79.51% compared to the same week of last year.

Other goods soared up to 51.34% including gram pulse, tomatoes, milk powder, gents' sandal, beef, moong pulse, shirting, garlic, salt powder and georgette.